Credit standards maintained

The Philippine banking industry continued to have high standards when it comes to credit, according to Bangko Sentral ng Pilipinas (BSP).

“I am pleased to share therefore that even with the high level of liquidity in the banking system and our own push toward a more inclusive banking industry, our banks, in general, adhere to high standards of credit discipline,” BSP Governor Amando Tetangco Jr. said in a speech before the delegates of the recently held Asian Banker 3rd Annual International Banking Conference.

He noted that while total loan portfolio increased by over a trillion pesos between December 2009 and March 2013, the amount of nonperforming loans (NPL) over the same period actually declined by over P11 billion.

Tetangco added that banks further increased their allowance for credit losses on loans by more than P11.6 billion, adding that the result is a declining NPL ratio and an NPL coverage ratio above 100 percent.

Also, he mentioned that the country’s credit-to-gross domestic product (GDP) ratio does not show any sign of unwarranted expansion.

“In fact, within Asean-5, we remain at the low end of the spectrum on this measure, suggesting that there is room to grow within the tenets of sound credit standards,” he said.

On the other hand, the BSP governor also reported that stress tests, which the monetary authority conducts every semester, showed that the balance sheet of banks can absorb extreme credit shocks.

Even at a 50-percent write off, capital positions are sufficient to take on the magnitudes of such losses, he said.

“Ladies and gentlemen, all of these indicators suggest that Philippine banks manage their credit exposures quite well. They observe a degree of conservatism needed to stay within the so-called ‘discipline of target markets’,” he added.

Tetangco further noted that this is evident by the declining levels of NPLs, high coverage ratio and moderate credit exposures vis-à-vis GDP.

“What makes these numbers even more impressive is the fact that banks have available liquidity that they can deploy, if they so choose,” he said.